Pavilion Reit reported core earnings of RM60mil for 1QFY15 and DPU of 1.53 sen, vs. 1.46sen in 4QFY14.
Results were within expectations – making up 24% of its full-year estimates of RM240mil and 25% of consensus.
"We make no changes to our EPS estimates. Pavilion Reit is expected to continue growing organically, underpinned by healthy rental reversion. FY15F earnings are expected to come in at RM251mil.
"Nevertheless, we see an exciting 2016 in relation to its acquisition plans.
"We expect increased newsflow momentum given that da:men mall is due for completion in 4QCY15. Notwithstanding this, the Pavilion Extension is also earmarked for completion by mid-2016," it said.
As for the underground tunnel which is connected to Pavilion Extension, Pavilion Reit has the right to use (but not acquire) the former. At the current level, valuation is fair.
It is trading at a distribution yield of 5.3% and a yield spread of 138bps against the 10-year Malaysia Government Bond’s 3.9%, AmResearch said.